Old Pension vs New Pension Scheme 2024: Complete Details

Old Pension vs New Pension Scheme Check Differences & Definitions | Old Pension vs New Pension Scheme Check Features & Benefits | Old Pension vs New Pension Scheme Check Advantages & Disadvantages | Old Pension vs New Pension Scheme Check Documents & Some Other Schemes | Old Pension vs New Pension Scheme Check Eligibility & All Details |

While the New Pension Scheme is available to all citizens between the ages of 18 and 60, government employees are the only ones eligible for the Old Pension Scheme. Whereas the New Pension Scheme is vulnerable to market risks, the Old Pension Scheme ensures a fixed pension. Thus, we can now distinguish between the Old Pension and the New Pension Scheme. While the Old Pension Scheme offers stability and a guaranteed pension, the New Pension Scheme offers greater returns and portability.

Through this article, we will provide you with all types of information about the Old Pension vs New Pension Scheme 2024 like purpose, Eligibility Criteria, Benefits, Features, important documents, etc. Apart from this, we will share with you the process to apply online for this scheme. To get complete information about this scheme, read this article till the end.

Old Pension vs New Pension Scheme

Despite the benefits of the more recent New Pension Scheme (NPS), government employees prefer the Old Pension Scheme (OPS) to be reinstated. Both offer government workers a monthly pension. A few states have already resumed the previous pension plan. Which is superior, though? After examining the distinctions between the Old Pension and the New Pension Scheme, this will become clear.

There are benefits and drawbacks to both the Old Pension and the New Pension Scheme. Government employees are guaranteed retirement benefits under the Old Pension Scheme, but the NPS is a market-linked plan with higher returns and portability. Some states have brought back the previous pension plan, but because of its flexibility and better returns, others favor the NPS.

Highlights Of Old Pension vs New Pension Scheme

The highlights of this scheme are as follows:-

Objectives of Old Pension vs New Pension Scheme

The main objective of releasing an article on Old Pension vs New Pension Scheme is to provide clarity to government employees about the benefits and drawbacks of both schemes. With the introduction of the National Pension System (NPS), many government employees have been confused about which scheme to opt for. The article aims to provide a comprehensive comparison of both schemes.

Another objective of releasing an article on Old Pension vs New Pension Scheme is to highlight the importance of retirement planning and financial literacy. The article will educate employees about the need for retirement planning and the various options available to them. It will also emphasize the importance of financial literacy and how to make informed decisions about retirement planning.

What is the Old Pension Scheme?

The Old Pension Scheme is a retirement scheme for government employees in which a monthly pension is provided based on the last drawn salary. It is managed by the government and provides a fixed pension amount for a secure and stable source of income during retirement. No contributions are required from employees, and survivor benefits may be available. 

What is the New Pension Scheme?

The New Pension Scheme is a retirement scheme that is based on the contribution and employment period of the subscriber. It is market-linked, providing higher returns compared to the Old Pension Scheme. It is managed by private pension fund managers, offering more flexibility and portability. It also provides tax benefits and allows employees to choose their pension fund manager.

Differences Between Old Pension vs New Pension Scheme

The key differences between these 2 pensions are as follows:-

• Pension Amount:– The Old Pension Scheme provides a fixed pension amount based on the last salary, years of service, and government’s contribution. The New Pension Scheme, on the other hand, may provide higher returns as it is market-linked, but the final pension amount is subject to market performance.
• Eligibility Requirements:- The Old Pension Scheme is available to all government employees, while the New Pension Scheme is mandatory for government employees who joined after 2004.
• Pension Fund Management:- The Old Pension Scheme is managed by the government, while the New Pension Scheme is managed by Pension Fund Regulatory and Development Authority (PFRDA) and various pension fund managers.
• Flexibility and Portability:– The Old Pension Scheme does not offer any flexibility or portability, while the New Pension Scheme offers flexibility in terms of choosing pension funds and portability if an employee switches jobs.
• Guaranteed Pension:– The Old Pension Scheme provides a guaranteed pension amount, while the New Pension Scheme is subject to market risks and does not offer a guaranteed pension.
• Contribution:– Under the Old Pension Scheme, the government contributes to the pension fund, while under the New Pension Scheme, both the employee and the government make contributions.

Advantages & Disadvantages of Old Pension vs New Pension Scheme

The top 10 advantages & disadvantages of these both 2 pensions are as follows:-

Advantages of Old Pension Scheme

• Provides a fixed pension amount based on the last salary and years of service.
• Managed by the government, which can give employees a sense of security.
• No contributions required from employees.
• Provides a stable source of income during retirement.
• Helps employees plan their retirement with certainty.
• Reduces the burden on employees to save for retirement.
• Does not depend on market performance.
• Provides survivor benefits to the spouse or dependents of the employee.
• May provide medical benefits to retired employees.
• Can be a valuable tool for attracting and retaining employees.

Disadvantages of Old Pension Scheme

• No flexibility or portability.
• Pension amount may not keep up with inflation.
• Pension amount may not be sufficient for long-term retirement needs.
• No control over pension fund investments.
• Potential for mismanagement by the government.
• No lump sum payout option.
• May not be suitable for employees with short-term employment.
• No option to choose the pension fund manager.
• Pension amount may not reflect changes in salary over time.
• May not be sustainable in the long run due to an aging population.

Advantages of New Pension Scheme

• Offers higher returns compared to the Old Pension Scheme.
• Employees can choose their pension fund manager.
• It is Portable.
• Market-linked, which means that the pension fund is invested in various financial instruments, providing employees with higher returns.
• Provides flexibility in contribution amount.
• Contributes to the development of the financial market.
• Helps in the development of long-term savings habits among employees.
• Provides tax benefits to employees.
• Provides a more transparent pension scheme.
• Provides a more sustainable solution for retirement benefits.

Disadvantages of New Pension Scheme

• Subject to market risks and volatility.
• Does not provide a guaranteed pension amount.
• May not be suitable for employees with low-risk tolerance.
• May not keep up with inflation, decreasing the pension value over time.
• May require employees to contribute a portion of their salary to the pension fund.
• May have high fees and charges associated with the pension fund.
• No lump sum payout option.
• May not offer survivor benefits to the spouse or dependents of the employee.
• May be subject to political and economic factors that could affect the pension fund.
• May not be as transparent as the Old Pension Scheme.

Factors to Consider When Choosing Between Old and New Pension Schemes

Here are the factors an individual must consider to make an informed decision about choosing between the Old Pension Scheme and the New Pension Scheme:-

• Age & Retirement Goals:– A person’s age and retirement goals are essential factors to consider when choosing a pension scheme.
• Employment Status:- Employees must check if they are eligible for the Old Pension Scheme or if they fall under the purview of the New Pension Scheme.
• Monthly Pension Amount:- Employees must evaluate if a fixed pension amount is better than a market-linked pension amount and if the amount is sufficient for their retirement needs.
• Fund Management:- Individuals must assess the fund managers’ performance, fees, and charges, and their investment strategy and analyze if it aligns with their goals.
• Flexibility:- Individuals must assess their need for flexibility and portability and check if the New Pension Scheme is more suitable than the Old Pension Scheme.
• Taxation:- Employees must understand the tax implications of both schemes and assess which scheme offers more tax benefits.
• Investment Risks:– Employees must understand the investment risks associated with both schemes and determine their risk appetite before choosing a scheme.
• Survivor Benefits:– Individuals must check if the scheme offers survivor benefits to their dependents and evaluate if that is a crucial factor to consider.   

Most Popular Pension Schemes

These are some of the most popular pension schemes offered by the central and state governments in India are as follows:-

Benefits Of Old Pension vs New Pension Scheme

The benefits of this article are as follows:-

• Portability: The new pension scheme allows for portability, meaning that you can easily transfer your pension fund from one employer to another or even between different pension fund managers.
• Higher Returns: The new pension scheme offers the potential for higher returns on your investment as it is market-linked, compared to the old pension scheme which offers fixed returns.
• Transparency: The new pension scheme provides greater transparency in terms of how your funds are being invested and managed, giving you more control over your retirement savings.
• Flexibility: The new pension scheme offers more flexibility in terms of contribution amounts and withdrawal options, allowing you to tailor your retirement savings to meet your specific needs.
• Tax Benefits: Under both old and new pension schemes, contributions are tax-deductible up to a certain limit, helping you save on taxes while building your retirement fund.
• NPS Lite: The new pension scheme includes a simplified version called NPS Lite, designed for individuals in the unorganized sector who may not be able to contribute large amounts regularly.
• Online Access: The new pension scheme allows you to manage your account online, making it easier to track your contributions, check your balance, and make changes to your investment strategy.
• Annuity Options: The new pension scheme offers a wider range of annuity options at the time of retirement, allowing you to choose the best payout option for your specific needs.
• Investor Control: The new pension scheme gives you more control over how your funds are invested, allowing you to choose between different asset classes and investment options.
• Increased Protection: The new pension scheme provides additional protection against inflation by allowing you to invest in market-linked assets, potentially helping your retirement savings grow over time.

Features Of Old Pension vs New Pension Scheme

The features of this article are as follows:-

Old Pension Scheme:-

• Defined Benefit Plan: The old pension scheme offers a defined benefit plan where the pension amount is based on the employee’s salary and years of service.
• Guaranteed Pension: The pension amount is guaranteed, ensuring financial security for the retirees.
• Fixed Monthly Pension: The pension amount is paid out in the form of a fixed monthly pension, providing a stable income source post-retirement.
• Pension for Life: The pension is provided for life, ensuring a steady income stream even in old age.
• Pension Commutation: The old pension scheme allows for a portion of the pension to be commuted for a lump sum amount at the time of retirement.
• Pension Revision: Periodic revisions are made to the pension amount to account for inflation and rising costs of living.
• Family Pension: The old pension scheme also includes provisions for family pension in case of the pensioner’s death, providing financial support to the surviving family members.
• Nomination Facility: Pensioners can nominate their family members to receive the pension benefits in case of their death.
• Post-Retirement Benefits: In addition to the pension, retirees under the old pension scheme may also be eligible for post-retirement benefits such as medical insurance, travel allowances, etc.
• Statutory Protection: The old pension scheme is backed by statutory protection, ensuring that the pension benefits are secure and cannot be easily altered by the employer or the government.

New Pension Scheme:-

• Defined Contribution Plan: The new pension scheme offers a defined contribution plan where the pension amount is based on the contributions made by the employee and employer, as well as the investment returns on those contributions.
• Market-Based Returns: The pension amount is not guaranteed and is subject to market fluctuations, offering the potential for higher returns but also higher risks.
• Annuity Options: The pension amount can be used to purchase an annuity plan from an insurance company, providing flexibility in choosing the pension payout options.
• Portability: The new pension scheme is portable, allowing employees to transfer their pension benefits when switching jobs or locations.
• Voluntary Contributions: Employees can make voluntary contributions to enhance their pension benefits under the new pension scheme.
• Tiered Structure: The new pension scheme has a tiered structure with different contribution levels and benefits for different categories of employees.
• No Pension Commutation: Unlike the old pension scheme, pension commutation is not allowed under the new pension scheme.
• Tax Benefits: The new pension scheme offers tax benefits on contributions and withdrawals, making it a tax-efficient retirement savings option.
• Investment Options: The new pension scheme offers a range of investment options to choose from, allowing employees to tailor their investment strategy based on their risk tolerance and financial goals.
• Flexibility: The new pension scheme provides flexibility in terms of contribution levels, investment choices, and retirement age, allowing employees to customize their pension plan according to their individual needs and preferences.

Old Pension vs New Pension Scheme Eligibility Criteria

The general eligibility criteria for each pension are as follows:-

• Old Pension Scheme:-
  • The applicant must be a citizen of India.
  • He or she must be a civil servant, police personnel, military personnel and other government officials.
  • The age limit must be 65 years.
  • he or she must have paid the premium amount of the pension scheme.
  • The minimum no. of servicing must be 20 years.
• New Pension Scheme:-
  • The applicant must be a citizen of India.
  • The age limit must be 18 to 65 years.
  • He or she must have opened the NPS Account.
  • The applicant must be employed or self-employed.
  • He or she must not hold any criminal record.

Important Documents 

Some of the important documents required to apply online for this scheme are as follows:- 

• Old Pension Scheme:-
  • Employee Provident Fund (EPF) Account
  • Service Records
  • Salary Certificate
  • Pension Payment Order (PPO)
  • Bank Account Details
  • Aadhar Card
  • Address Proof
  • Identity Proof
  • Pension Application Form
  • Medical Certificate (if applicable)
• New Pension Scheme:-
  • Permanent Retirement Account Number (PRAN) Card
  • KYC Documents
  • Duly Filled NPS Application Form
  • Bank Account Details
  • Nomination Form
  • Initial Contribution
  • Subscriber Registration Form
  • Photographs